Chairman Pai Continues to Hide the Truth About Broadband Investment to Justify His Vendetta Against Net Neutrality

September 20, 2017

Contact: Timothy Karr, 201-533-8838

WASHINGTON — In filings this week about the FCC’s forthcoming wireless-competition report, Free Press called out Chairman Ajit Pai for misrepresenting the state of broadband investment following the agency’s 2015 Net Neutrality ruling.

The FCC is required by statute to compile this annual report to Congress on the state of the wireless industry. The 20th annual report is the first edition to come due during Pai’s chairmanship. The report is on the docket for the FCC’s next monthly meeting, which will take place on Tues., Sept. 26. During that meeting, the commissioners will consider and then vote on adoption of the final report. Pai released the draft of this annual report earlier this month.

In a recent speech at an industry conference, Pai claimed that this draft contains evidence that wireless-industry capital investment declined from 2015 to 2016. He suggested that this decline is due to the FCC’s February 2015 Title II reclassification decision and adoption of open-internet rules.

On Tuesday, Free Press sent a letter to Pai condemning the chairman for misusing this report and “once again misleading the public” to advance his “irrational vendetta” against the Net Neutrality rules the FCC put in place during the Obama administration.

“The easily verifiable truth is that wireless-industry investments peaked in 2013, as carriers completed the bulk of 4G LTE deployments,” the Free Press letter reads. “Both that peak, and the ongoing decline from it, predate the entire proceeding that led to the 2015 reclassification of broadband as a lightly regulated Title II service. What’s more, this is by no means the only years-long downturn for the wireless sector: Such periods of slower spending are natural — and, in the recent past, have likewise occurred outside of recessions.”

The Free Press letter includes detailed analysis that proves that this fluctuating trend is part of a larger pattern of investment that has nothing to do with the rules the FCC adopted to prevent internet-access providers from blocking, throttling or otherwise discriminating against the online communications of internet users. The letter also notes that many previous agency reports on wireless competition specifically caution against misinterpretation of short-term investment data. Yet the draft of Pai’s report provides no such historical context — and no warnings about investment patterns.

Free Press Policy Director Matt Wood made the following statement:

“Since coming into office with the Trump administration, Pai has repeatedly lied about the state of broadband investment since the 2015 open-internet rules came into effect. He’s trying to paint a picture of decline and dysfunction to justify destroying the protections that internet users need.

“The real investment numbers tell a completely different story. Our letter to Chairman Pai restores the context about wireless investment that his draft report tries to hide, and in the process we restore information that Pai quite literally would erase from the historical record if he could get away with it.

“The FCC — and wireless carriers too — used to acknowledge basic truths about investment. Over the long haul — and since the 2015 Open Internet Order — broadband investment has been on the rise. But there are fluctuations from year to year, and from one company to another, because different carriers are on different upgrade paths.

“You don’t have to take our word for it: Our letter cites AT&T’s own comments on wireless investment, explaining that ‘there is no reason to expect capital expenditures to increase by the same amount year after year’ because carriers ‘make significant expenditures to upgrade and expand their networks in one year ... and then focus the next year on signing up customers and integrating those new facilities into their existing networks.’ In other words, according to AT&T itself, ‘Minor variations from year to year ... should not be surprising.’

“Wireless investment has been trending downwards since 2013, after most of the big carriers finished their 4G buildouts. It should start to tick back up again soon as carriers head into the next-generation 5G network buildouts in earnest. None of this has anything to do with the FCC’s decision in 2015 to treat broadband as a Title II service. It’s just the way the business works. Chairman Pai is either ignorant of that reality, or trying to fool you. We suspect it’s the latter.

“Broadband investment after Title II is doing just fine, but it’s never been true that every company or every sector spends more and more money every single year. In fact, as technology improves, carriers can sometimes spend less while getting better results for their money. Our letter describes the cyclical nature of wireless investment, and it also shows that prior FCC chairmen — Republicans and Democrats alike — issued annual reports that rightly recognized this truth. Those reports duly cautioned that simple aggregate investment totals and changes from year to year should not be over-interpreted by analysts and policymakers.

“Chairman Pai ignores this wisdom in his determination to misuse and cherry-pick data suiting his predetermined positions. He seems content to parrot the hysteria and faulty research of phone and cable lobbyists and their paid-for analysts. Unlike Pai, the real numbers don’t lie, and they paint a picture of a healthy and growing broadband sector since the rules were put in place.

“In this most recent report, Pai is up to the same old tricks. He’s deliberately obscured the facts and ignored the findings contained in prior reports, which routinely found extended periods of declining investment in years before the 2015 Open Internet Order vote. This year’s report should do the same or better — instead of pretending there’s some unusual decline and then attempting to pin it on Title II.”